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The purpose of this study is to examine the impact of customers' environmental concern on corporate green innovation and its underlying mechanisms.

This study empirically examines the impact of customer environmental concern on corporate green innovation using 967 company-customer-year observations of Chinese A-share listed companies over the period 2012–2022.

The empirical results show that customer environmental concern significantly enhances corporate green innovation. Furthermore, executive environmental awareness and research and development (R&D) investment play a partial mediating role in this relationship. The heterogeneity analysis reveals that state-owned customers, customers located in the same province with the corporate and the intellectual property model cities contribute to strengthening this relationship. Moreover, corporate performance analysis shows that customer environmental concern can significantly increase corporate financial performance and sustainable performance.

This study innovatively proposes a measure of customer environmental concern and examines its impact on corporate green innovation and its underlying mechanisms. In addition, this study also proposes some insights for policymakers.